Tuesday, September 29, 2009

While many stocks have doubled or tripled over the past five or six months, venerable Ginza retailer, Matsuya, has been more than cut-in-half during the last three. The charts herein minimize the need for words about the pain inflicted upon large and concentrated (not to mention potentially leveraged) shareholders.

"Why has this happened", one might ask, at a time when re-risking, carry-trades, fast-narrowing risks-premia are more than de rigeur? Some might point to a recent poor earnings announcement. But this has been a prevailing fact of Matsuya life for more than two decades for this time-honoured family and passive shareholders. In fact, one might argue that for the controlling family, it is more a way of life than an economic pursuit. No. the more probable answer is classical Entropy as described in December 2007 post entitled Matsuya (8237) - Good Luck ! ( You'll Need It....). Therein, I described the folly of SFP Value Realization's accumulation of Matsuya shares (at least from SFP investors point of view) at higher and higher prices, and, suggested that eventually, the supremacy of the Second Law of Murphy will rule, in which not only will anything that might go wrong, will, but these things will inevitably be caused by unforeseen Shit Happening. And so it has come to pass.

We will eventually know the precise reasons as returns are revealed, and filings are made public. In the meantime we might, on the basis of historical experience, intelligently speculate as to the cause. Occam would suggest that Mr Baran's SFP Value Realization has been liquidating. Volume averages are somewhat symmetrical to the original accumulations, and the price impacts similarly devastating, even before the earnings disappointment. For outside of index investors, there are no players excepting SFP. Redemption requests, performance-related issues, release of funds from gates, all might have caused vicious unwind into a veritable vacuum.

There is however, a second possibility. This might be termed the "low hanging fruit" thesis. Armed with the knowledge of the paucity of inflows, a venturesome plunger might posit SFP was in little position to buy more to maintain absolute (or even relative) prices from index flows. Although there is no non-callable stock to borrow, one might be able to source sizable chunks of callable stock, to push the proverbial boulder down the hill. Commencing such an operation would likely trigger a red-alert at SFP's Prime Broker, and cause grave damage to prevailing daily P&Ls and thus NAVs,, thus raising the alarm with investors in sufficient time to submit that September 30th redemption notice, an outcome which would force liquidation into the hands of the plunger who (having big balls and a strong constitution) would undoubtedly continue to hit the bids in front of their increasingly desperate sales, a script (from the Concentrated Long's point of view) that would resemble anything Hitchcock might have conjured at the peak of his abilities.

Yes, maybe it was earnings related. But the comparison with other retailers remains stark. Fortunately perhaps, for SFP, few care about about such market games. Matsuya, it appear, will not be be committing Seppuku anytime soon in order to placate the whims of foreign carpetbaggers. For the purposes of this post, I am agnostic. But for investors, who've paid "2 & 20", on the upside, and who will not nor cannot claw it back, the outcome is sobering, for even if they had the good fortune to have money with the plunger, they will be haircut there, too, and still need then to exit their now-oversized short position...

Wednesday, September 23, 2009

I am, in a strange sort of way, sorry to see the "recession" leave so quickly (if it indeed is leaving us). Not that I find subdued traffic, diminished restaurant queues, and elastic pricing unpleasant, of course, but I do not wish more suffering upon fellow citizens than necessary. And I understand that large complex processes (such as humanity's combined economic activity) are difficult to attenuate in the best of times, and that in the heat of the moment, faced with what was a quite real threat of systemic collapse from loss of confidence, the cost vs. benefit of letting the house fire burn itself down vs. the quite heightened risk of the fire spreading IMHO justified action. We can quibble about the details, for I am no apologist for four-letter financial program acronyms that give away our collective money without extracting an appropriate slice of flesh on our collective behalf. However, I just have a gnawing feeling that the "recession" (as perhaps did each post-1981 recession) left much of its work unfinished. Leveraged spec still rules, and what wasn't killed one might argue, is perhaps even stronger. Despite falls in counsumer credit, overall credit growth (according to David Pearson) remains positive as Feds have picked up the slack (for now). Little in the way of debt-to-equity conversion has been been realized. Aggregate energy use remains profligate (and likely unsustainable) contributing to the still-sorry state of America's current account, which is bloodier-red than Omaha Beach in 1944. Expectations of what IS, what should be sustainably normal remains elevated; real estate agents (and stock brokers) are as ubiquitous as ever, and the People still have no clue that they ARE The State. Employing the house-fire analogy again, it's as if the flames were nipping at the home of the despised and uncivic-minded neighbors, whose children were the neighborhood bullies, who neglected their property, free-rode upon others' initiatives, and whom most would have been happy to see depart - even under such beastly incendiary circumstances. But now, with the fire extinguished, the smoke has cleared and the damage is such they will be staying, so long as their Prop-Cat insurer stays afloat and makes good their claim). Perhaps they will be slightly chastened. Perhaps they now will tend to essential electrical repairs, remove the rusting hulks from the yard, and their children might no longer smoke in bed. And so this recession leaves the proverbial house uncleaned, excess capacity unremoved, less-than-competitive enterprises continuing to pursue less-than-successful practices, corporate rent-seeking run amok, specs (even those who flamed-out spectacularly) unchastened, and hubris emblematic (ironically through the good graces of the very public saviours now-scorned by those emboldened [again]). Though I do not deny that I possess a curmudgeonly streak, this feeling is not mean-spirited, but just Calvinistic. As such, perhaps we should endeavor to collectively expend an appropriate effort upon BOTH the qualitative nature of growth, and the quality of down-cycle, each unnatural and akin to using one's weak, opposite, hand. It isn;t pleasant, but it is decidedly useful in the longer run.

Wednesday, September 16, 2009

"How do I love thee? - Let me count the ways..." Thy ways in CY2009 alone include: iMac G5 24", iPhone 3GS 16gb, iPhone 3GS 32gb, iTouch 16gb, iTouch 32gb, and a MacBook Pro 13" 250gb. I won't tell you the damage, but you can do the math. This is in addition to our existing iMacs, and iPods of virtually all vintage since inception. And I consider myself a Luddite (of sorts)! My ardour was enhanced with the discovery that I can tether my iPhones to any machine (via bluetooth no less!) to share its 3G connection to the web, which wihile not helping me conjure posts during the past month, did enable the family to overcome the abominable work (or lack thereof) of the terrassier on our external connections to the world.

But no relationship is perfect (at least in my experiences). And so I discovered when, upon arrival, I plugged in my c2004 iMac G5 20" PowerPC, depressed the on-button, which was immediately followed by a thunderous BANG! as if rapper Dolla was capped in my new home office. This was followed by the pungence of melting electronics or burnishing solder, an undesirable aroma in the vicinity of any computer - especially one's own. WTFFFF??!?!? Pirsig would term this a "gumption trap", and it took some deep breaths to keep my demeanor centered upon puzzlement rather than its more visceral outlet: rage.

Back into its box. Into the car. And a same-day drop-off (it weas Friday) to the regional authorized Apple Service center where my machine had received a scheduled appointment, Monday at 200pm, which was a welcome change from the flunky banana republicanism prevailing in my old locale. At precisely 2:05pm on Monday, iPhone rings, and service center confirms it's the Power Supply ("alimentation" en francais) ...yes, please order one...Wed?...yes that's fine....Merci, Au revoir. Wow, these guys have their act together. Wed arrives. Service center phones. Ummm Houston we've a problem. Power supply installed but it won't boot? The logic board is fried too?? About Euro700 for new power supply, logic board, and labour? Thanks, leave it for now.

But it was what the technician said next that fascinated me. He said my machine strangely had a 110v-only power supply inside. I said that was impossible - everyone knows everything Apple is dual-voltage. He confirmed yes, everything Apple is dual voltage, however the fact remained my iMac G5 was sporting a 110v-only power supply. No wonder it got smoked when 220v of juice coursed into it. But how did it get in there?? Then I vaguely recalled the repair of a known-fault involving random-shutdowns we'd experienced in 2007. After many calls to the Apple helpline, and numerous futile attempted fixes, I reckoned it was hardware. Ah yesss....the local authorized Apple service center had (in typical banana republic fashion taking one month) replaced the power supply with a non-standard replacement. The buggers!!

I phoned Apple, and after three attempts with underlings and a month's worth of mobile credit, finally tracked down a Senior Customer service rep. I pointed out that Apple had responsibility since their authorized service center replaced my power supply with a non-OEM non-standard part. I said I would like some justice, and someone is culpable, and it's not me. What I got was that " service centers are independent". "We don't know why they put in a 110v only power supply". "You have to take it up directly with the service center". "How can we even know the logic board was fried as a result of the power supply explosion?!? Infuriating first line of defense stuff more suited to an HMO or health insurer trying to deny a claim. I said I would pursue directly with the service center, but in any event Apple should take this seriously since their authorized service center is probably arbing them by collecting high rates for reimbursement of warranty repairs and using shitty low-rent 110-only replacements.

I phoned the offending service center and asked the secretary to email me the service report which she promptly did. Excellent! No mention of 110-only. I got past the gatekeeper and phoned the CEO, apologizing in advance for bothering him with such petty matters. Explained my case: machine in for repair -> diagnosis=power supply ->power supply replaced -> non-standard part -> plug into 220v -> BANG! He commiserates, says he will investigate. Says it will be interesting to see whether Apple themselves dispatched the part. A week passes. It seems, he says, we followed normal protocol. We entered the serial number into Apple's system per protocol; it recommended the precise replacement part, and dispatched it to us. No unauthorized parts. All parts to Apple spec. "Sorry we can't help you...but we did everything correctly".

Back to Apple Customer Service. Email them the copy of the service report and the explanation of offending service center and further details demanding an explanation. Few days later I receive a telephone call from Mr Apple. They have investigated my case #567893456443/XF2. Yes, Apple dispatched the offending part. Yes, the part was a 110v-only power supply. But, Apple, he says also followed standard operating procedures and dispatched the offending part because the machine was operating in the North American region in a 110v environment. This is their standard protocol. Sorry, you are fucked, and if you wish to pursue this you'll have to take it up with "Legal".

I listen to his explanation. I am shocked that I am shocked, but shocked I am. My serenity and placidness dissipate. I tell him I understand that they followed their standard operating procedure. German officers used the same lame defense at Nuremburg and it didn't fly. Their SOP I tell him is flawed - well-and-truly-fucked. You recommended, and shipped a replacement part with one that was NOT an OEM part, and not only was it no an OEM part, but it substantively changed the critical functionality of the machine WITHOUT INFORMING THE CUSTOMER or creating an avenue that would in some way allow the customer to know or discover the functionality has critically changed. No red-sticker on the rear of the machine suggesting "Warning 110v-Only". No blurb to the repair center asking them (as Apple's agents) to inform the customer. In fact, the repair center was unlikely to have even known the part was a deviant from the OEM power-supply. What sayeth you Mr Apple....??

More back and forth and chipping away at their position. "The procedure is NOT flawed". "IF you were going abroad with the machine, you should have told them the service center that you had special considerations". I replied, IF this were the issue, then why does Apple, as a global enterprise in a globalized world, use duall-voltage power supplies as their OEM spec? Wy not use 110-only as an OEM part?" More silence. More Customer Service waffling in return, the kind that is learned after many hours of intensive training to teach empathy followed by denial tactics. But I could see I was making progress in my case. He was hesitating longer in his counterarguments. His tone was softening. He could see the absurdity of his claims that the procedure was not flawed, despite repeating it. Personally, he was already on my side, though seemingly prevented from relenting and shipping me my power supply and logic board out of SOP. I continued to chip away, and managed to get so far as him admitting he can do nothing, and that if I wanted justice, I would need to prove my resolve by putting in writing to and sending to Customer Service Central in Cupertino.

There is no shortage of love-hate with Apple. Their products are lovely in almost all respects. But their customer service, stranglehold on iPhone Apps and music via iTunes, gouging on replacement parts (bought a brick or MacBook battery recently!) are maddening at the best of times. Yes, my pursuit of justice is probably less-than economic for me. But they have truly pissed-off a good customer, and I will see this one through, out of principal. So wish me luck as we see whether my pen and the compelling logic of my claim is mightier than their errrr ummm customer service brick-wall...

Sunday, September 13, 2009

Perhaps my friends at my favorite broadsheet, The Financial Times, can tell me what it means when their "Survey on Japanese Banking and Finance" (in last Monday's UK edition) was but four pages in length, containing not a useful column inch of copy nor a noteworthy advertisement (one week later I reckon I recall Nomura might have had ponied up. Oh how we [FT &I) must both pine for the days when such an insert was almost equal in length to the news or markets sections themselves!! Yet another telltale...?!?? Surely I wasn't the only one to notice?

Saturday, September 05, 2009

Long absence indeed. An inward looking interlude. Completing profoundly personal chores. Like listening to The Eels. Some will know why [I am listening to this music], for they [The Eels] are by no means adorning the walls of bedrooms around the world. Wry. Sketpical. Musically quirky. Too-cerebral. I am attracted. There are too many tunes that I like, but you can start with: I Like Birds, Mr E's Beautiful Blues, and for your pleasure, Your Lucky Day in Hell. We'll be back shortly with our regularly unscheduled drivel and thanks to all who've inquired and/or pined for Cassandra. And no, rest assured, I am not Tyler Durden.....

Escape From the Rat Race

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